I write for a world filled with confusion and self-interest. If you agree that people search for simple, straight-forward and unbiased analysis follow along as we "Make Cents" of topics ranging from the economy (including a splash of political analysis), the world of investing, and financial planning (ex; estate & tax, insurance, risk management, and retirement strategies). My background includes working for a large wirehouse to the largest global bank to a small boutique planning firm and now as an independent registered investment advisor serving affluent and high net worth clients. I have also been a Contributing Editor with Investment Advisor magazine for the past seven years. My credentials include: Certified Financial Planner (CFP); Accredited Estate Planner (AEP), Board Certified in Estate Planning (BCE); Certified Tax Specialist (CTS); and Chartered Mutual Fund Counselor (CMFC). Follow along as we attempt to "Make Cents."

The Demise Of The Middle Class?

America was founded on the premise of government “of the people, by the people and for the people.” As such, it becomes necessary to collect money from the people since the government is not a business enterprise established to make a profit. Whether you call it taxes or revenue (the new buzzword), government must collect taxes from the people to carry out its mission. Hence, it’s important that Americans pay their fair share. However, what seems to be lost in today’s conversation is how government’s role has been redefined over the past 80 years. Clearly, the founding fathers held a view of a smaller, less intrusive government whereas many of today’s politicians believe government should be larger and involve itself in solving the many problems of its citizens. And there are certainly plenty of problems, especially in the wake of the worst economic crisis since the Great Depression.

I recall, during the 2008 crisis, Obama’s Chief of Staff, Rahm Emanuel, saying, “You should never let a serious crisis go to waste.” In other words, a crisis is an opportunity for government to expand as individuals seek answers to ‘all that ails them.’ However, once government creates a new department, once it expands to meet the need, it’s rare that it disassembles the new department once the problem has passed.

The Incredible Shrinking Middle Class

There’s a great deal of discussion over the demise of middle class America. It’s been stated that the rich get richer, the poor get poorer and the middle class gets smaller. What influences this reduction? Let’s examine it. A smaller government requires less tax revenue than a larger government. Agreed? As the size and scope of government increases, it becomes necessary to collect more revenue. Still with me? A smaller government could ostensibly live on taxes collected solely from those who hold the greatest proportion of wealth, the rich. However, as government grows, it becomes necessary to collect more and more and the middle class becomes the obvious target since the poor have little to take. Once the middle class is “taxed out” and government still needs more to operate, since the poor have nothing to take, the rich are once again targeted. This is when class warfare comes into existence as politicians pit one group against the other. You’ll know the sales job was sufficient when you hear the poor cry out against those who have succeeded. Today we hear comments like, “The rich get richer at the expense of the poor.” But if the poor don’t have anything to take. How could they possibly make the rich, richer? Nothing could be farther from the truth. The truth is, as more become rich, the poor benefit as the private sector thrives and opportunities emerge. When you attempt to over-tax the rich, they will either relocate or cut back and if they do become less rich, the poor will suffer as well. This has been demonstrated time and time again.

It’s true that there’s a perpetual migration of the classes at all times. Some who are rich become poor and some in the middle class become rich. The point is that there is equal opportunity for anyone who desires to succeed. But today, there is a growing discontentment emanating from those who believe their answer is found in governmental decrees rather than from one’s own initiative and hard work.

Conclusion

Today, we have bred a culture of laziness. As entitlement spending has mushroomed, those on the receiving end have little incentive to get up, get out, and get to work. As long as this mentality is pervasive and grows, politicians who cater to this crowd will continue to rule. Once America reaches a tipping point where there are more people looking to government to meet their needs than not, we will descend into the abysmal pit of poverty. This may take several of years or even decades. But it always ends the same way. Good things may come to those who wait, but idle hands makes one poor.

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